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PAYE

Employees earning a wage or salary are taxed directly from their pay. This is known as PAYE (pay as you earn).  As an employer, you're responsible for deducting and paying PAYE income tax on your employees' behalf.

Your responsibilities

Each pay period you need to calculate and deduct PAYE. Each month you send Inland Revenue an Employer monthly schedule (IR348) (external link) — also known as an EMS — and Employer deductions (IR345) (external link) . You can do all of this, and make your payments, with IR’s ir-File online service (external link) .

PAYE is pretty straightforward once you're set up. But different rules can apply to some payments, eg lump sum payments like bonuses or retirement payouts, or to special types of workers. If you're at all unsure of what you need to do, speak to Inland Revenue or a tax advisor.

Do you know the basics of taxes and levies for businesses? Take this quiz to find out.

The amount of PAYE you deduct depends on the employee’s tax code and how much they earn. To work out what you need to deduct, use Inland Revenue's PAYE/KiwiSaver deductions calculator (external link) .

If you pay out holiday pay at 8% of annual income, use Inland Revenues's tax on holiday pay calculator (external link) .

Filing returns

The easiest way to file your PAYE returns is to use Inland Revenue’s ir-File online service (external link) (you have to file this way if you pay more than $100,000 a year in PAYE and employer superannuation contribution tax).

If you use ir-File to file and pay PAYE, your business can also offer your employees payroll giving — where they can donate money from their pay towards a charity approved by Inland Revenue.

Payroll giving (external link) — Inland Revenue

If you've made a mistake

If you need to correct a mistake in an EMS you’ve already filed, you can either file an Employer monthly schedule amendments (external link) (IR344) form or, if only a small number of changes are needed, call Inland Revenue on 0800 377 772 to have corrections made over the phone.

A subsidy is available to all businesses paying less than $500,000 a year in PAYE and ESCT to outsource their payroll services.

A subsidy is available to all businesses paying less than $500,000 a year in PAYE and ESCT to outsource their payroll services.

Avoid these common PAYE pitfalls:

  • Getting the calculations wrong — getting it right is important both for you and your employee. Use Inland Revenue's calculators to check.
  • Not contacting Inland Revenue immediately if you realise you've made a mistake — it can usually be corrected pretty easily.

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